McCain’s Budget Whopper

July 7, 2008

Robert Reich

George W. Bush took the largest budget surplus in history and transformed it into a giant deficit. McCain’s economic plan, announced today, will to even worse. McCain says he’s going to balance the budget by the end of his first term (actually, he didn’t literally say that – he just “demanded” it – implying that a Democratically-controlled Congress would be ultimately responsible if it didn’t happen). And then McCain came up with numbers that will blow the deficit into the stratosphere.

Who gets all these cuts? Mostly, the very rich and big corporations.

The non-partisan Congressional Budget Office projects that the budget deficit will be $443 billion in 2013, the end of the next president’s first term, if Bush’s tax cuts are made permanent (which McCain pledges to do). So start with this $443 billion hole. Now add in McCain’s promise to cut corporate taxes by a hundred billion a year ($4 billion of this for American oil companies, more than a billion for Exxon-Mobile alone). Then add in McCain’s promise to get rid of the Alternative Minimum Tax, designed to ensure that the very rich pay at least a minimum percent of their income in tax. Obama would properly index it to inflation but McCain will let the rich pay as little as they can get away with. Non-partisan tax experts put the ten year cost of this at $1 trillion. All told, McCain promises more than $650 billion of new tax cuts per year. (That doesn’t even include McCain’s promise to allow corporations to immediately expense all their investments – which, he asserts, would add nothing to the budget deficit at all!)

Who gets all these cuts? Mostly, the very rich and big corporations. The non- partisan Tax Policy Center estimates that 25 percent of McCain’s cuts would go to people earning over $2.8 million a year (the top one-tenth of one percent). Each would get an average tax cut of $269,000, over and above what George Bush gave them.

Supply-side economics is one of those unfortunate half-brained theories actually to have been tried in practice, and failed miserably.

Back to McCain’s promise to balance the budget by the end of his first term. The big question is how he proposes to fill the giant budget hole he’s dug for himself, over and above the $443 billion already there. Answer: He doesn’t say. He calls for $160 billion in unspecified spending cuts, and unspecified “reform” of entitlements. Whaaaa?

Supply-side economics is one of those unfortunate half-brained theories actually to have been tried in practice, and failed miserably. Now we have a candidate for president of the United States who says to the American people, in effect: I know you know supply-side economics is a crock. Well, I’m going to do the biggest supply-side tax cut in history, mostly for corporations and the well-to-do. And I’m going to tell you I’ll balance the budget. If you believe this, you’ll believe anything.

Robert B. Reich is Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written eleven books (including his most recent, Supercapitalism). Mr. Reich is co-founding editor of The American Prospect magazine. His weekly commentaries on public radio’s “Marketplace” are heard by nearly five million people. This entry appeared on his blog.